Financial intermediaries in the midst of market manipulation: Did they protect the fool or help the knave?

B-Tier
Journal: Journal of Corporate Finance
Year: 2015
Volume: 34
Issue: C
Pages: 210-234

Authors (3)

Atanasov, Vladimir (not in RePEc) Davies, Ryan J. (Babson College) Merrick, John J. (not in RePEc)

Score contribution per author:

0.670 = (α=2.01 / 3 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We examine a fund manager's alleged manipulation of platinum and palladium futures settlement prices. Using benchmarks from parallel electronic markets, we find that the manager's market-on-close trading causes significant settlement price artificiality. Defying predictions that competition among floor traders should limit any artificiality, the artificiality increases in the second half of the alleged manipulation period. Between 35% and 52% of the latter-period artificiality is directly attributable to noncompetitive floor prices. Inflated floor volume contributes a similar proportion to artificiality via the exchange's trade-weighted settlement price formula. We estimate that floor counterparties reaped more than $6.0 million in excess profits.

Technical Details

RePEc Handle
repec:eee:corfin:v:34:y:2015:i:c:p:210-234
Journal Field
Finance
Author Count
3
Added to Database
2026-01-25